2012-12-31: financial statements · 2018-01-04 · salaries and wages $ 551,248 $ 140,471 $ 691,719...

GEORGIA UNITED METHODIST FOUNDATION, INC.

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FINANCIAL STATEMENTS WITH

INDEPENDENT AUDITOR'S REPORT

DECEMBER 31, 2012 AND 2011


TABLE OF CONTENTS __________

Page Independent Auditor's Report 1 Financial Statements: Statement s of Financial Position as of December 31, 2012 and 2011 3 Statement s of Activities for the Years Ended December 31, 2012 and 2011 4 Statement of Functional Expenses for the Year Ended December 31, 2012 5 Statement of Functional Expenses for the Year Ended December 31, 2011 6 Statement s of Cash Flows for the Years Ended December 31, 2012 and 2011 7 Notes to Financial Statements 9

BROOKS, MCGINNIS & COMPANY, LLC CERTIFIED PUBLIC ACCOUNTANTS

5871 GLENRIDGE DRIVE

(404) 531-4940 SUITE 200 MEMBER OF AICPA

FAX: (404) 531-4950 ATLANTA, GA 30328 DIVISION FOR CPA FIRMS

1

INDEPENDENT AUDITOR'S REPORT

To the Board of Trustees of Georgia United Methodist Foundation, Inc.: We have audited the accompanying financial statement s of the Georgia United Methodist Foundation, Inc. (the Foundation) which comprise the statements of financial position as of December 31, 2012 and 2011, and the related statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our audit opinion.

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Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Georgia United Methodist Foundation, Inc., as of December 31, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Atlanta, Georgia May 16, 2013


The accompanying notes are an integral part of these financial statements. 3

2012 2011

Cash and cash equivalents $ 1,241,790 $ 4,481,930 Certificates of deposit 1,052,727 1,029,572 Account and interest receivables 45,134 45,443 Investments - Foundation 8,322,027 7,112,146 Investments - held for others 64,916,407 61,194,194 Less unsecured promissory notes payable issued by the

Foundation included in investments (4,930,900) (6,671,234) Loans, net 24,232,327 20,783,031 Prepaid expenses and other assets 9,590 11,028 Donated real estate - 505,000 Donated real estate available for sale, net - 205,000 Other real estate owned 364,264 364,264 Property and equipment, net 14,710 16,402

Total assets $ 95,268,076 $ 89,076,776

Liabilities:Accounts payable - trade $ 6,138 $ 7,865 Accrued expenses and other liabilities 165,405 136,936 Managed funds held for others 48,432,234 44,167,245 Endowment funds held for others 13,654,580 12,804,551 Charitable remainder trust and gift annuity

benefits payable 1,583,713 2,736,966 Charitable remainder trust and gift annuities

deferred benefits payable 1,087,966 1,492,837 Unsecured promissory notes payable 27,394,250 26,888,195 Less unsecured promissory notes issued by the Foundation and included in investments (4,930,900) (6,671,234)

Total liabilities 87,393,386 81,563,361

Commitments and contingencies

Net assets:Unrestricted 6,244,561 5,857,926 Temporarily restricted 1,496,966 1,522,326 Permanently restricted 133,163 133,163

Total net assets 7,874,690 7,513,415

Total liabilities and net assets $ 95,268,076 $ 89,076,776

Assets:

STATEMENT S OF FINANCIAL POSITION DECEMBER 31, 2012 AND 2011

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STATEMENT S OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

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2012 2011

Changes in unrestricted net assets:

Revenues, gains and support:

Contributions $ 31,841 $ 81,337

Asset management fees 304,103 288,110

Consulting fees 58,267 114,600

Interest income from loan program 1,163,937 1,119,612

Investment return 622,032 (5,935)

Lease revenue 27,280 27,280

Gain (loss) on sale of donated real estate 158,024 -

Other 5,273 3,221

Total unrestricted revenues and gains 2,370,757 1,628,225

Net assets released from restrictions 136,613 397,245

Total unrestricted revenues, gains and support 2,507,370 2,025,470

Expenses:

Program services 1,830,121 1,960,215

General and administrative 290,614 269,562

Total expenses 2,120,735 2,229,777

Increase (decrease) in unrestricted net assets 386,635 (204,307)

Changes in temporarily restricted net assets:

Contributions 79,938 89,135

Investment return 43,587 28,221

Change in value of split interest agreements (12,272) (12,806)

Net assets released from restrictions (136,613) (397,245)

Decrease in temporarily restricted net assets (25,360) (292,695)

Increase (decrease) in net assets $ 361,275 $ (497,002)

Net assets at beginning of year $ 7,513,415 $ 8,010,417

Increase (decrease) in net assets 361,275 (497,002)

Net assets at end of year $ 7,874,690 $ 7,513,415



STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2012

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Program General and

Services Administrative Total

Salaries and wages $ 564,528 $ 174,965 $ 739,493

Payroll taxes and benefits 148,567 27,937 176,504

Total wages and benefits 713,095 202,902 915,997

Insurance 8,865 4,020 12,885

Interest expense 755,363 4,364 759,727

Office expenses 16,295 4,517 20,812

Rent 36,829 16,701 53,530

Repairs and maintenance 591 269 860

Professional fees 39,689 26,618 66,307

Costs associated with other real estate 16,293 - 16,293

Telephone 4,634 1,157 5,791

Computers and data processing 5,137 1,775 6,912

Depreciation 8,079 2,001 10,080

Dues and subscriptions 1,564 1,564

Fees 1,175 5,745 6,920

Travel and meetings 12,997 17,310 30,307

Grants to beneficiaries 153,283 - 153,283

Loan loss provision 34,000 - 34,000

Marketing and publicity 23,141 - 23,141

Other expenses 655 1,671 2,326

$ 1,830,121 $ 290,614 $ 2,120,735



STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2011

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Program General and

Services Administrative Total

Salaries and wages $ 551,248 $ 140,471 $ 691,719

Payroll taxes and benefits 149,470 28,721 178,191

Total wages and benefits 700,718 169,192 869,910

Insurance 8,972 4,069 13,041

Interest expense 783,502 4,073 787,575

Office expenses 16,627 5,202 21,829

Rent 39,280 17,315 56,595

Repairs and maintenance 3,045 - 3,045

Professional fees 32,651 33,075 65,726

Costs associated with other real estate 15,304 - 15,304

Telephone 7,325 2,203 9,528

Computers and data processing 7,904 2,848 10,752

Depreciation 8,057 3,148 11,205

Dues and subscriptions 665 2,121 2,786

Fees 3,862 6,751 10,613

Travel and meetings 14,602 17,839 32,441

Consulting expense 19,728 - 19,728

Grants to beneficiaries 177,692 - 177,692

Provision for impairment of donated

real estate available for sale 20,000 - 20,000

Bad debt - direct write off 25,028 - 25,028

Loan loss provision 53,000 - 53,000

Marketing and publicity 20,284 - 20,284

Other expenses 1,969 1,726 3,695

$ 1,960,215 $ 269,562 $ 2,229,777



STATEMENT S OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

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2012 2011

Cash flows from operating activities:Increase (decrease) in net assets $ 361,275 $ (497,002) Adjustments to reconcile increase (decrease) in net assets to net cash used in operating activities:

Depreciation 10,080 11,205 Provision for loan losses 34,000 53,000 Provision for impairment of donated real estate - 20,000 Gain on sale of donated real estate (158,024) - Change in value of split interest agreements 12,272 12,806 Bad debt - direct write off - 25,028 Unrealized (gain) loss on investments (517,665) 83,600 Realized gain on investments (40,274) (9,360) Endowed Funds appropriated for expenditure 265,348 348,115 Changes in assets and liabilities:(Increase) decrease in:

Receivables 309 (17,169) Prepaid expenses and other assets 1,438 (1,611)

Increase (decrease) in:Accounts payable (1,727) (19,049) Accrued expenses (96,151) 164,888

Total adjustments (490,394) 671,453

Net cash provided by (used) operating activities (129,119) 174,451

Cash flows from investing activities:Purchase of property and equipment (8,388) (12,865) Purchase of investments (1,489,838) (251,548) Proceeds from the sale of investments

and donated stock 784,925 604,719 Endowed Funds appropriated for expenditure (265,348) (348,115) Purchase of certificates of deposit (23,155) (904,572) New mortgage loans made to churches (6,280,527) (11,709,395) Repayments made on principal 3,156,390 2,008,615 Proceeds from the sale of donated real estate 868,024 -

Net cash used in investing activities (3,257,917) (10,613,161)

(Continued on next page)



STATEMENT S OF CASH FLOWS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

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2012 2011Cash flows from financing activities:

Proceeds from unsecured promissory notes payable 11,362,068 9,049,044 Repayment of unsecured promissory notes payable (10,856,013) (3,095,394) Loan participations received (359,159) 4,429,654

Net cash provided (repaid) by financing activities 146,896 10,383,304

Net decrease in cash and cash equivalents (3,240,140) (55,406)

Cash and cash equivalents at beginning of year 4,481,930 4,537,336

Cash and cash equivalents at end of year $ 1,241,790 $ 4,481,930

Supplemental disclosure of cash flow information:

Change in funds held for others:Managed fund held for others $ (4,264,989) $ (2,697,995) Charitable remainder trust and gift annuity

benefits payable 1,153,253 (255,771) Charitable remainder trust and gift annuity

deferred benefits payable 404,871 (230,679) Endowment funds held for others (850,029) 1,582,297

Change in value of funds held for others $ (3,556,894) $ (1,602,148)

Interest paid on line of credit $ 4,364 $ 4,073

Interest paid on development program certificates 777,938 740,927

Total interest paid $ 782,302 $ 745,000

GEORGIA UNITED METHODIST FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies Nature of Operations The Georgia United Methodist Foundation, Inc. (the “Foundation ”) was formed on January 1,

2010, through the merging of the North Georgia United Methodist Foundation, Inc. and the South Georgia United Methodist Foundation, Inc. The newly formed Foundation is a religious, not-for-profit corporation providing services for affiliates of the United Methodist Church, including the Annual Conference s of the United Methodist Church (the Conference), local churches, other institutions, agencies, boards and individuals associated with the Methodist Church. The Foundation assists churches in the establishment of planned-giving programs, accepts and administers funds as both donee and manager for gifts and endowments, and provides loans and stewardship services to local churches and other institutions. All of these services are interrelated and are provided using common resources. Therefore, these services are treated as a single program on the statement of functional expenses.

Basis of Accounting and Presentation The Foundation prepares its financial statements in accordance with generally accepted

accounting principles “GAAP.” This basis of accounting involves the application of accrual accounting; consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred.

To recognize limitations and restrictions placed on the use of resources available to the

Foundation, resources are classified for accounting and financial reporting purposes into three categories established according to their nature and purposes. The assets, liabilities and net assets of the Foundation are reported in three categories as follows:

Unrestricted net assets are resources that are neither permanently nor temporarily

restricted by donor-imposed stipulations.

Temporarily restricted net assets are resources whose use by the Foundation is limited by donor-imposed restrictions that either expire by the passage of time or can be fulfilled by actions of the Foundation.

Permanently restricted net assets are those whose use by the Foundation is limited by

donor-imposed stipulations requiring that the corpus be maintained in perpetuity.


DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies - Continued

Revenue Recognition Contributions (including unconditional promises to give i.e. pledges or private grants) are

recognized as revenue in the year they are received or pledged, with allowances provided for pledges estimated to be uncollectible. Unconditional pledges or private grants that are expected to be collected within one year are recorded at net realizable value. Unconditional pledges or private grants that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are received. Amortization of the discounts (if any) is included in contributions in the accompanying statements of activities and changes in net assets. Conditional pledges or private grants are not included as support until the conditions are substantially met.

The Foundation recognizes contributions as restricted support if they are received with donor

imposed restrictions that limit the use of the donated assets. When a donor-imposed restriction is met or the passage of time expires, temporarily restricted net assets are reclassified to unrestricted net assets and presented in the accompanying statements of activities and changes in net assets as net assets released from restrictions. Donated land, buildings, and equipment are recognized as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used, as well as gifts of cash or other assets that must be used to acquire long-lived assets, are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Foundation reports expirations of donor restrictions when the donated or acquired long-lived assets are placed into service. Donated Services

The Foundation records contributed services if the services received create or enhance long-

lived assets or require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.

A number of unpaid volunteers, including those serving in the capacity of Board members,

have made significant contributions of their time in the furtherance of the Foundation's programs. The value of this contributed time is not reflected in these financial statements since it does not meet the above recognition criteria.


DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies - Continued Donated Assets

Donated real estate and marketable securities acquired by gift are recorded at fair market value on the date of the donation.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Foundation considers all temporary cash

investments, and highly liquid investments to be cash equivalents except money market funds included in the investment portfolio, which are included in investments.

Liquidity Reserve The Foundation maintains a Liquidity Reserve of liquid or near liquid assets to ensure that it

can meet its obligations in relation to the Private Placement Deposit Certificates outstanding. The Foundation intends to maintain sufficient liquidity to meet normal interest payments as they accrue and to repay principal amounts on outstanding certificates as they are presently projected to mature. The reserve amount shall not be less than ten percent (10%) of the first $1,000,000 in certificates outstanding, and five percent (5%) of any certificate amounts outstanding in excess of $1,000,000.

Investments

The Foundation records investments, including managed funds held for others, at fair value.

Investments in marketable securities or equity mutual funds with readily determinable fair values and all investments in debt securities or fixed income funds are valued in the statement of financial position at their fair value. Fair value is determined by reference to exchange or dealer-quoted market prices. Gains or losses from investments are reflected in the statements of activities.

Loans and Interest Receivable

The Foundation extends loans to United Methodist Churches in the North and South Georgia Annual Conference s and related entities. These loans generally are for terms of one year to twenty years, with an interest rate reset every five years. The loans are secured by first mortgages on land and buildings and bear interest at various rates.

Loans are stated at the amount of unpaid principal less a valuation allowance for possible loan

losses. The Foundation recognizes interest on the unpaid balance of the loans when earned.


DECEMBER 31, 2012 AND 2011 __________

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Nonaccrual Loans The accrual of interest on impaired loans is discontinued when, in management’s opinion, the

borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid interest is reversed against interest income. Interest income is subsequently recognized only to the extent cash payments are received.

A nonaccrual loan may be returned to an accruing status when (a) all delinquent interest and

principal become current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectability is no longer doubtful.

Impaired Loans Loans are considered to be impaired when, in management’s judgment and based on current

information, full collection of principal and interest becomes doubtful. A loan is also considered impaired if its terms are modified in a troubled debt restructuring. Impaired loans are placed in nonperforming status, and future payments are applied to principal until such time as collection of the obligation is no longer doubtful.

When the Foundation identifies a loan as impaired, the impairment is measured based on the

present value of future cash flows, discounted at the loan’s effective interest rate, except when the sole (remaining) source of repayment for the loan is the liquidation of collateral. In these cases, the current fair value of the collateral is used, less selling cost when foreclosure is probable.

In the event that the net realizable liquidation value of the collateral is less than the principal

balance of the underlying mortgage loan, the anticipated deficiency balance is charged off. To return to performing status, loans must be fully current, and continued timely payments

must be a reasonable expectation. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.


DECEMBER 31, 2012 AND 2011 __________

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Allowance for Loan Losses The allowance for loan losses is based on management’s ongoing evaluation of the loan

portfolio and reflects an amount that, in management’s opinion, is adequate to absorb probable incurred losses in the loan portfolio. In evaluating the portfolio, management takes into consideration numerous factors, including current economic conditions, prior loan loss experience, the composition of the loan portfolio, and management’s estimate of credit losses.

Loans are charged against the allowance at such time they are determined to be losses.

Subsequent recoveries are credited to the allowance. The allowance is composed of general allocations and specific allocations. General allocations

are determined by applying loss percentages to the portfolio that are based on historical loss experience and management’s evaluation of the “risk” of the Foundation’s loan portfolio. Additionally, the general economic trends are included in this evaluation. The need for specific allocations may be required when, based on management’s evaluation, the Foundation’s risk exposure has increased given the current payment status and value of the underlying collateral of a specific loan. Loans for which specific allocations are provided have been excluded from the calculation of the general allocations.

Management considers the year-end allowance appropriate and adequate to cover probable incurred losses in the loan portfolio: however, management’s judgment is based on a number of assumptions about current events, which are believed to be reasonable, but which may or may not prove to be valid. Thus, there can be no assurance that loan losses in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required Other Real Estate Owned Other real estate includes real estate acquired through foreclosure. Other real estate is carried at the lower of its recorded amount at the date of foreclosure or estimated fair value less costs to sell based on independent appraisals. Any excess of the carrying value of the related loan over the fair value of the real estate at the data of foreclosure is charged against the allowance for loan losses. Fair value is principally based on independent appraisals performed by local credentialed appraisers. Any expense incurred in connection with holding such real estate or resulting from any write downs subsequent to foreclosure is included in expense. When the other real estate property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.


DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies - Continued Property and Equipment The Foundation capitalizes expenditures for property and equipment in excess of $500.

Purchased property and equipment are carried at cost. Donated property and equipment are carried at the approximate fair value at the date of donation. Depreciation is provided on the straight -line basis over the estimated useful lives of the assets. These lives are estimated at three to five years for computer equipment and software, and five to seven years for furniture and equipment. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss resulting from the disposition is reported in the statements of activities.

Managed Funds Held for Others

The Foundation holds and manages investments, which belong to the Annual Conference s, United Methodist churches, institutions, and agencies. These investments have been reported as a liability for amounts held for others rather than being recognized as revenue to the Foundation. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally

accepted in the United States of America requires management to make estimates and assumptions that reflect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Functional Allocation of Expenses The costs of providing the various programs and other activities are summarized on a

functional basis. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

Income Tax Status

The Foundation is a not-for-profit organization exempt from income taxes under the provisions of Internal Revenue Code Section 501(c)(3). Accordingly, no provisions for federal and state income taxes have been recorded in the accompanying financial statements. The Foundation believes that it has appropriate support for any tax positions taken and as such, does not have any uncertain tax positions (based on a “more-likely-than-not” standard for substantiation) that are material to the financial statements. As of December 31, 2012 and 2011, years 2009-2011 remain open for examination by federal and state authorities.


DECEMBER 31, 2012 AND 2011 __________

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Subsequent Events

Management has reviewed, through May 16, 2013, (the date which these financial statements

were available to be issued), events occurring subsequent to December 31, 2012 in order to evaluate their impact on these financial statements. In accordance with GAAP, there are two types of subsequent events:

Recognized subsequent events – These are events or transactions that provide evidence

about conditions that existed at the date of the statements of financial position, including estimates inherent in the process of preparing financial statements. All such evidence known to management through the date that these financial statements were available to be issued has been factored into the preparation of these financial statements.

Non-recognized subsequent events – These are events or transactions that did not exist at the date of the balance sheet but arose subsequent to that date, and thus are not recognized in the balance presented in these financial statements. These events may be disclosed, however, in order to inform the users of the financial statements.

Endowment Funds Held for Others

The Foundation receives, manages and administers a collection of funds which belong to the Annual Conference s, United Methodist churches, institutions, agencies and individuals. These accounts have different restrictions based on the donors’ intent when the funds were transferred to the Foundation. The requirements primarily center around annual and quarterly distributions to a charitable entity, such as, a cemetery, church, scholarship fund, etc. The corresponding liability for these investments is reported as Endowment Funds Held for Others.

Charitable Remainder Trust and Gift Annuities and Deferred Benefits Payable The Foundation receives gift annuities for its benefit and for the benefit of third parties which

stipulate that periodic payments be made from the gifts to designated parties for the lives of those parties. The Foundation uses the rates published by the American Council of Gift Annuities to compute and establish the periodic payments that will used over the life of the annuity and classifies this amount as annuities payable, which is included in the “Charitable Remainder Trust and Gift Annuities Payable” section of the statement of financial position. The Foundation uses the Social Security Administration’s life-expectancy tables to compute the estimates of present value. The estimated remaining amount of the gift that will be paid to a third party charity upon the death of the annuitant is included in “Charitable Remainder Trust and Gift Annuities Deferred Benefits Payable”. If a portion of the gift annuity is to be left to the Foundation , the excess of the annuity gift over the present value of the estimated liability is


DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies - Continued Charitable Remainder Trust and Gift Annuities and Deferred Benefits Payable - Continued

recorded as a contribution upon the death of the annuitant. Any change in the present value of the annuity payable is charged or credited to income annually.

The Foundation also receives contributions which are various types of split interest agreements.

These accounts are treated in the same manner as the gift annuities except that the amount of the periodic payment to the beneficiary is recomputed annually. At the end of the trust term, or upon the death of the beneficiary, any remaining balance is paid to the designated charitable beneficiary or is recorded as a contribution to the Foundation if the Foundation has variance power.

Fair Value Measurement

The Foundation utilizes fair value measurement to record fair value adjustments to certain

assets and liabilities and to determine fair value disclosures. Investment securities are recorded at fair value on a recurring basis. From time to time, the Foundation may be required to record at fair value other assets on a non-recurring basis, such as loans and certain other assets. The nonrecurring fair value adjustment typically involves the application of write-downs of individual assets. In addition, the Foundation is required to disclose, but not record, the fair value of other financial instruments. Fair Value Hierarchy The Foundation groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of assumptions used to determine fair value. These levels are:

Level 1 – Inputs that utilize quoted prices in active markets for identical assets or liabilities that the Foundation has the ability to access.

Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – Inputs that are unobservable for the asset and liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of fair value measurement is based on inputs from

different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement of the entire entity.


DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies - Continued Fair Value Measurement - Continued

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Cash and Cash Equivalents

Short term financial assets include cash, interest bearing deposits and cash equivalents. These assets are carried at historical cost. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination and its expected realization.

Investments

Investment balances reported as Level 1 are derived from quoted market prices on public exchanges. Funds classified as Level 2 and 3 consist of investments in units of private funds to which proportionate net assets can be attributed. The Foundation maintains the ability to redeem these investments at the net asset value (NAV) reported by the investee managers and therefore uses these amounts to derive the reported investment values.

Loans

The Foundation does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. The fair value of impaired loans is estimated using one of several methods including collateral value and discounted cash flows. When the impaired loan is valued using the underlying collateral, the Foundation records the impaired loan as Level 2. When an appraised value is not available and other methods are used to determine the loan’s fair value, the Foundation records the loan as Level 3. Deposit Liabilities

For disclosure purposes, the fair value of fixed maturity private placement deposit certificates is estimated by discounting the future cash flows using the rates currently offered for certificates of deposit with similar remaining maturities. The fair value of the fixed maturity private placement deposit certificates was $27,394,25 0 and $26,888,195 at December 31, 2012 and 2011, respectively.


DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies - Continued Fair Value Measurement - Continued The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis:

Investment securities 2012 2011

Level 1 $ 4,420,315 $ 3,787,316

Level 2 3,389,378 2,870,742

Level 3 512,334 454,088

Total $ 8,322,027 $ 7,112,146

At December 31,

Assets measured at fair value on a nonrecurring basis are included below:

Donated and other real estate 2012 2011

Level 2 $ 364,264 $ 1,074,264 Total $ 364,264 $ 1,074,264

At December 31,

New Accounting Pronouncement In May 2011, the Financial Accounting Standards Board issued Accounting Standards

Update (ASU) No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRS.” These amendments were effective for the fiscal year ending December 31, 2012. ASU No. 2011-04 clarifies or changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. The adoption of ASU No. 2011-04 did not have a material impact on the Foundation ’s financial position or results of operation.

Endowment Funds

As described in Note 13, the purpose of the Foundation’s Endowment Funds is to generate investment return that can be used to support the Foundation’s operating activities. Accordingly, the Foundation liquidates for distribution a portion of the Endowment Funds based on the Foundation’s spending policy. This appropriation to support operating activities is shown in the Statement of Cash Flows as a decrease in investing cash and an increase in operating cash.


DECEMBER 31, 2012 AND 2011 __________

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1. Nature of Organization and Significant Accounting Policies - Continued Reclassification of Amounts Certain amounts previously reported have been reclassified to conform to the current year

financial statement presentation. 2. Cash and Cash Equivalents

Cash and cash equivalents consist of the following:

2012 2011

Unrestricted cash $ 964,944 $ 4,227,662

Board designated liquidity reserve 276,846 254,268

Total cash and equivalents $ 1,241,790 $ 4,481,930

At December 31, 2012, the Board designated liquidity reserve also included $1,052,727 in Certificates of Deposits making the total liquidity reserve $1,329,573.

3. Investment Assets The Foundation’s Equity Fund is comprised of two private funds established by the General

Board of Pension and Health Benefits of The United Methodist Church. (the GBOP) through its Wespath program. All funds are managed through Wespath Investment Management which is the investment management division of the GBOP. The GBOP follows a policy of Socially Responsible Investing. This policy is mandated by the United Methodist Church for all United Methodist entities including the Foundation. The Foundation’s choice of using these Funds is to ensure that the Foundation’s investments comply with the investment policy set forth in The Book of Discipline of the United Methodist Church.

The GBOP Equity Funds are made up of a combination of exchange-traded companies (both foreign and domestic), real estate and private equity limited partnerships and are described as private funds. Per the GBOP, the real estate and private equity partnerships are valued using the net asset value. As the Foundation’s Equity Fund is made up of a combination of GBOP’s Equity Funds which are not exchange-traded and include underlying assets valued using NAV, these investments are considered Level 2 and 3 investments. Amounts up to $1,000,000 in private funds held by the GBOP can be redeemed daily without a redemption notice period. Redemption over $1,000,000 require a 15 day notice period. Unsecured Promissory Notes Payable issued by the Foundation are essentially deposit instruments carried at cost, which approximates fair value and are considered Level 1 investments. Additionally, at December 31, 2012, the Foundation held money market funds and cash comprising approximately 7% of total investment assets. Money market funds are carried at their cost value, which approximates fair value and are therefore Level 1 investments.


DECEMBER 31, 2012 AND 2011 __________

20

3. Investment Assets - Continued

The Fixed Income Fund is comprised of a selection of exchange-traded fixed income funds and therefore is considered a Level 1 investment.

Investments of the Foundation are stated at fair value and are summarized as follows:

Quoted Market

Prices in Active

Markets for

Identical Assets

Significant

Other

Observable

Inputs

Significant

Unobservable

Inputs

Description 12/31/2012 (Level 1) (Level 2) (Level 3)

Money market funds $ 970,995 $ 970,995 $ - $ -

Exchange traded fixed income mutual funds:

Intermediate 2,284,855 2,284,855 - -

Short Term Bank Loan 254,465 254,465 - -

Unsecured promissory notes issued

by the Foundation 910,000 910,000 - -

Other private funds:

U.S. equity :

Large cap core 586,586 - 586,586 -

Large cap growth 648,332 - 648,332 -

Large cap value 679,205 - 679,205 -

Mid cap core 216,111 - 216,111 -

Mid cap growth 123,492 - 123,492 -

Small cap core 216,111 - 216,111 -

Small cap growth 308,730 - 308,730 -

Domestic REITs 61,746 - - 61,746

Alternative -private equity partnerships 92,619 - - 92,619

Alternative -real estate 154,365 - - 154,365

International equity :

Emerging markets 146,595 - 146,595

Small cap international 130,306 - 130,306 -

International large cap 480,505 - 480,505 -

International REITs 48,865 - - 48,865

International private equity 8,144 - - 8,144

$ 8,322,027 $ 4,420,315 $ 3,389,378 $ 512,334


DECEMBER 31, 2012 AND 2011 __________

21


Quoted Market

Prices in Active

Markets for

Identical Assets

Significant

Other

Observable

Inputs

Significant

Unobservable

Inputs


Money market funds $ 547,599 $ 547,599 $ - $ -

Exchange traded fixed income mutual funds

Intermediate 1,911,786 1,911,786 - -

High Yield 207,931 207,931 - -


by the Foundation 1,120,000 1,120,000 - -

Other private funds:

U.S. equity funds

Large cap core 521,977 - 521,977 -

Large cap growth 548,076 - 548,076 -

Large cap value 548,076 - 548,076 -

Mid cap core 182,692 - 182,692 -

Mid cap growth 78,296 - 78,296 -

Small cap core 130,494 - 130,494 -

Small cap growth 260,988 - 260,988 -

Domestic REITs 130,494 - - 130,494

Alternative -private equity partnerships 156,593 - - 156,593


International equity funds

Core developed international 287,009 - 287,009 -

International growth 102,047 - 102,047 -

Emerging markets 114,804 - - 114,804


International large cap 38,268 - 38,268 -

International equity 77,149 - 77,149 -

$ 7,112,146 $ 3,787,316 $ 2,870,742 $ 454,088


DECEMBER 31, 2012 AND 2011 __________

22


The following schedule summarizes the investment loss or return on the Foundation’s investments in the statements of activities at December 31:

2012 2011

Dividend and interest income $ 107,680 $ 96,526 Realized gain on investments 40,274 9,360 Unrealized (loss) gain on investments 517,665 (83,600)

Total investment return-Foundation $ 665,619 $ 22,286

Expenses related to investment revenues, including custodial fees and investment advisory

fees, amounted to $31,962 and $31,276 in 2012 and 2011, respectively, and have been netted against investment revenues in both the above schedule and in the accompanying statements of activities.

Activity for the Foundation’s alternative funds which are measured at fair value on a recurring basis using unobservable inputs are summarized below for the years ending December 31:

Beginning balance $ 454,088 $ 379,155 Purchases 36,192 151,270 Sales (17,438) (55,170) Net appreciation 39,492 (21,167)

Ending balance $ 512,334 $ 454,088

With regard to the investments that the Foundation manages and holds for the United Methodist churches, church members, affiliated institutions, and other agencies , these investments are broken down into the following investment management categories:

2012 2011

Managed funds held for others $ 48,590,148 $ 44,191,491 Endowment funds held for others 13,654,580 12,804,551 Gift annuities and charitable

remainder trusts 2,671,679 4,198,152

Total investments held for others $ 64,916,407 $ 61,194,194


DECEMBER 31, 2012 AND 2011 __________

23

3. Investment Assets - Continued These investments held for others are stated at fair value and are summarized as follows by category of type of investment:

Quoted Market

Prices in Active

Markets for

Identical Assets

Significant

Other

Observable

Inputs

Significant

Unobservable

Inputs


Money market funds $ 4,303,523 $ 4,303,523 $ - $ -

Exchange traded US equity mutual funds:

Large cap core 305,757 305,757 - -

Large cap growth 91,039 91,039 - -

Mid cap growth 41,850 41,850 - -

Mid cap blend 40,958 40,958 - -

Small cap growth 26,031 26,031 - -

Equity income 77,553 77,553 - -

Flexible portfolio 23,753 23,753 - -

Emerging markets 40,166 40,166 -

Exchange traded International equity mutual funds:

International large cap growth 48,380 48,380 - -

International growth fund 47,459 47,459 - -

International small cap 26,465 26,465 - -

Exchange traded fixed income mutual funds:

Intermediate 17,708,102 17,708,102 - -

Short Term 1,081,809 1,081,809 - -

Short term high yield bank loan 1,866,077 1,866,077 - -



Corporate Bonds 12,682 12,682 - -

Common Stocks

Utilities 4,281 4,281 - -

Medical supplies 4,102 4,102 - -

Information technology 30,108 30,108 - -



DECEMBER 31, 2012 AND 2011 __________

24


Quoted Market

Prices in Active

Markets for

Identical Assets

Significant

Other

Observable

Inputs

Significant

Unobservable

Inputs


Other commingled funds:

US equity :

Large Cap Core 5,279,278 - 5,279,278 -

Large Cap Growth 5,834,992 - 5,834,992 -

Large Cap Value 6,112,848 - 6,112,848 -

Mid Cap Core 1,944,997 - 1,944,997 -

Mid Cap Growth 1,111,427 - 1,111,427 -

Small Cap Core 1,944,997 - 1,944,997 -

Small Cap Growth 2,778,568 - 2,778,568 -

Domestic REITs 555,714 - - 555,714

Alternative -Private Equity Partnerships 833,570 - - 833,570

Alternative -Real Estate 1,389,284 - - 1,389,284

International Equity :

Emerging Markets 1,319,353 - - 1,319,353

Small Cap International 4,324,545 - 4,324,545 -

International Large Cap 1,172,758 - 1,172,758 -


International Private Equity 73,297 - - 73,297

$ 64,916,407 $ 29,800,995 $ 30,504,410 $ 4,611,002


DECEMBER 31, 2012 AND 2011 __________

25

3. Investment Assets - Continued These investments held for others are stated at fair value and are summarized as follows by category of type of investment:

Quoted Market

Prices in Active

Markets for

Identical Assets

Significant

Other

Observable

Inputs

Significant

Unobservable

Inputs


Money market funds $ 3,614,067 $ 3,614,067 $ - $ -

Exchange traded equity mutual funds

Large Cap Core 422,201 422,201 - -

Large Cap Growth 78,570 78,570 - -

Mid Cap Core 45,569 45,569 - -

Mid Cap Growth 45,569 45,569 - -

Small Cap Core 27,977 27,977 - -

Flexible Portfolio 26,282 26,282 - -

Emerging Markets 42,178 42,178 - -

International Equity Mutual Funds

International Growth 52,987 52,987 - -

Small Cap International 30,521 30,521 - -

International Large Cap 54,259 54,259 - -

Fixed Income Mutual Funds

Intermediate 15,217,005 15,217,005 - -

High Yield 1,540,173 1,540,173 - -

Short Term 3,556,912 3,556,912 - -

Corporate Bonds 34,237 34,237 - -

Municipal bond 5,000 5,000 - -



Common Stocks

Consumer goods 15,002 15,002 - -

Utilities 4,650 4,650 - -

Technology 28,283 28,283 - -



DECEMBER 31, 2012 AND 2011 __________

26


Quoted Market

Prices in Active

Markets for

Identical Assets

Significant

Other

Observable

Inputs

Significant

Unobservable

Inputs


Other commingled funds

US equity fund

Large cap core 4,950,509 - 4,950,509 -

Large cap growth 5,198,035 - 5,198,035 -

Large cap value 5,198,035 - 5,198,035 -

Mid cap core 1,732,678 - 1,732,678 -

Mid cap growth 742,575 - 742,575 -

Small cap core 1,237,627 - 1,237,627 -

Small cap growth 2,475,255 - 2,475,255

Domestic REITs 1,237,627 - - 1,237,627

Alternative -private equity partnerships 1,485,153 - - 1,485,153


International equity fund

Core developed international 2,722,038 - 2,722,038 -

International growth 967,836 - 967,836 -

Emerging markets 1,088,815 - - 1,088,815



$ 61,194,194 $ 30,392,676 $ 26,131,934 $ 4,669,584

The total amount of unsecured promissory notes payable issued by the Foundation and included in the above investment categories was $4,930,900 and $6,671,234 at December 31, 2012 and 2011, respectively. Accordingly, these amounts have been reflected as reductions in Statements of Financial Position.


DECEMBER 31, 2012 AND 2011 __________

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4. Loans

The Foundation’s loan portfolio consists of forty-eight (48) loans to churches and entities associated with the Conference, and these loans were made out of a pool of funds invested with the Foundation through the Development Fund Program. The Foundation approves these loans based upon specific Board approved criteria, and all loans are secured by the individual entity’s land, buildings, and equipment. In order to reduce its risk and to diversify the portfolio, the Foundation, under terms and limits established by the Board of Trustees, may sell portions of larger loans to other entities in the form of participations. The purpose of the Foundation’s loan program is to make first-lien mortgage loans to church congregations, districts, mission institutions and extension agencies within the Annual Conference s for the purchase, construction, expansion or major improvements of churches, parsonages or mission buildings, or the refinancing of loans made for those purposes. Construction period loans are interest-only until the construction period is complete and the construction loan is closed into a permanent loan. Terms of the non-construction loans range from five to twenty years. Loans with terms longer than five years typically have an interest rate reset provision where the interest rate paid during the loan is renegotiated every five years to the market rate at that time. At December 31, 2012, interest rates ranged from 4.50% to 5.95% depending on the loan. Major classifications of loans are as follows at December 31:

2012 2011

Term loans $ 23,260,770 $ 20,330,596 Construction period loans 1,180,557 627,435

24,441,327 20,958,031

Less: Allowance for loan losses (209,000) (175,000)

Loans, net $ 24,232,327 $ 20,783,031

The Foundation considers a loan to be impaired when it is probable that it will be unable to collect all amounts due according to the original terms of the loan agreement. Impaired loans may include loans which are not accruing. Nonaccrual loans are those in which the collection of interest is not probable and all cash flows are recorded as reductions in principal. Amounts of impaired loans that are not probable of collection are charged off immediately. At December 31, 2012 and 2011, the Foundation has no loans it considered impaired .


DECEMBER 31, 2012 AND 2011 __________

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5. Allowance for Loan Losses A summary of changes in the allowance for loan losses is as follows:

2012 2011

Beginning balance $ 175,000 $ 122,000

Additional provision 34,000 53,000

Ending balance $ 209,000 $ 175,000

6. Other Real Estate Owned The Foundation’s other real estate consists of one special use property with a church building

and as described in note 19, this was sold in February 2013. 7. Donated Real Estate An individual (donor) deeded a house to the Foundation. The donor was to remain in the home

and was responsible for the utilities, cleaning and landscape maintenance until the donor expires or permanently moves out of the home. The Foundation was responsible for the insurance, taxes and major repairs as long as the donor remained in the house. Upon the donor’s death or permanent move from the home, the house was to be sold and the proceeds from the sale would become unrestricted. At December 31, 2011 the value of the house was estimated to be $205,000. In 2011 the donor moved out of the home and allowed the Foundation to list the home for sale. During 2012, this home was sold for $204,024, net of closing costs, resulting in a loss from sale of donated real estate of $976.

In 2002, South Georgia United Methodist Foundation, Inc. received 681.9 acres of land located in Evans County, Georgia. The Foundation receives an annual lease payment of $27,280 for the use of the land. The lessee has been granted an option to purchase the land in 2014 for a price of $1,000 per square acre, for a total of $682,000. As the lessee had made no indication that they would exercise this option, the land was recorded at the value assessed by the county for property tax which was $505,000. During 2012, the lessee negotiated an early purchase of the land for $664,000 resulting in a gain on sale from donated real estate of $159,000. Accordingly, there was no balance in donated real estate at December 31, 2012.


DECEMBER 31, 2012 AND 2011 __________

29

8. Property and Equipment

Property and equipment consist of the following at December 31:

2012 2011

Computers and equipment $ 36,987 $ 36,190 Software 9,419 9,419 Furniture and fixtures 34,460 34,460

80,866 80,069

Less: accumulated depreciation (66,156) (63,667)

Property and equipment, net $ 14,710 $ 16,402

9. Unsecured Promissory Notes Payable

The Foundation issues unsecured promissory notes payable in the form of Term Certificates to fund its lending program. Previously, these certificates had been registered with the Securities Commissioner of the State of Georgia pursuant to Section 10-5-22 of the Georgia Securities Act of 2008, as amended. The terms and conditions of these certificates are set forth in the Offering Memorandums. Under the terms of these Offering Memorandums, the funds are not revolving so when a block of certificates mature, certificates cannot be reissued under the same Offering. On July 1, 2009, Georgia Securities Code Section 10-5-10(7), Exemptions From Registrations, became effect. In 2012, the Foundation filed an Offering to issue up to $7.5 million unregistered, unsecured promissory notes through July 14, 2013. At December 31, 2012, approximately $2.6 million had been issued against this $7.5 million. Promissory notes payable (certificates) consist of the following at December 31:

2012 2011

One year term certificates $ 6,028,560 $ 2,071,317

Two year term certificates 1,561,323 2,336,686

Three year term certificates 7,048,598 11,260,557

Four year term certificates 12,755,769 11,219,635

$ 27,394,250 $ 26,888,195

Term notes have maturity dates ranging from one year to four years and paid interest in the range of 1.05% to 4.05% during 2012 depending upon the term of the certificate and the amount deposited.


DECEMBER 31, 2012 AND 2011 __________

30

9. Unsecured Promissory Notes Payable - Continued

The scheduled maturities for demand and time deposits are as follows:

2013 $ 11,314,6152014 10,164,3852015 2,896,0492016 3,019,201

$ 27,394,250

10. Line of Credit The Foundation has a $750,000 unsecured line of credit with SunTrust Bank, to be drawn upon

as needed. No balance was outstanding at both December 31, 2012 and 2011. 11. Temporar ily Restricted Net Assets Temporarily restricted net assets consist of the following at December 31:

Donor advised funds $ 1,390,650 $ 1,403,744

Split interest agreements 104,944 117,214

Program restriction-missions 1,372 1,368

Total temporarily restricted net assets $ 1,496,966 $ 1,522,326

12. Net Assets Released from Restrictions

Net assets were released from donor restrictions by incurring expenditures satisfying the restricted purpose or by occurrence of other events specified by the donor for various programs. Total net assets released from restrictions for the years ended December 31, 2012 and 2011 amounted to $136,613 and $397,245, respectively.


DECEMBER 31, 2012 AND 2011 __________

31

13. Endowed Net Assets

The purpose of the Foundation ’s Endowment Funds is to generate investment return that can be used to support the Foundation’s operating activities. When the Endowment Funds began, the initial contributions included donor restrictions related to spending only income. During the ensuing years, undesignated contributions received by the Foundation were transferred into the Endowment Fund and designated by the Board of Trustees to function as an Endowment Fund. Net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowment, are classified and reported based on the existence or absence of donor-imposed restrictions. The Foundation follows the requirements of Georgia’s Uniform Prudent Management of Institutional Funds Act (the Act) which became law July 1, 2008. Upon receipt of gifts and bequests, the Foundation evaluates the gift instrument and related information to determine the directions and intentions of the donor. Under the Act, all earnings for permanently restricted funds are considered temporarily restricted until appropriated for expenditure. As of December 31, 2012, the accumulated earnings for the board designated endowment funds were classified as unrestricted net assets.

From time to time, the fair value of invested assets associated with individual donor restricted endowment funds may fall below the level that the donor requires the Foundation to retain as a fund of perpetual duration. There were no such deficiencies as of December 31, 2012. The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to the operations supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce an annual return in excess of the CPI plus 3% while maintaining prudent risk limits. Actual returns in any given year may vary from the objective. The Foundation has a policy of appropriating for distribution each year 4.5% of a 12 quarter moving average of the Endowment Fund portfolio value, ending on the last trading day in September. The amount calculated is budgeted for spending during the following year.


DECEMBER 31, 2012 AND 2011 __________

32

13. Endowed Net Assets – Continued

Endowment net assets by type of fund and related changes consisted of the following as of December 31, 2012:

Unrestricted

Permanently

Restricted Total

Endowment net assets, beginning of year $ 5,527,334 $ 133,163 $ 5,660,497

Investment return: Investment income 50,486 - 50,486 Transfers in 873,026 - 873,026 Net appreciation (realized and unrealized) 549,050 - 549,050

1,472,562 - 1,472,562

Contributions - - - Assets appropriated for expenditure (265,348) - (265,348)

Endowment net assets, end of year $ 6,734,548 $ 133,163 $ 6,867,711

Endowment net assets by type of fund and related changes consisted of the following as of December 31, 2011:

Unrestricted

Permanently

Restricted Total

Endowment net assets, beginning of year $ 5,839,206 $ 133,163 $ 5,972,369

Investment return: Investment income 57,909 - 57,909 Net appreciation (realized - and unrealized) (73,448) (73,448)

(15,539) - (15,539)

Contributions 51,782 - 51,782 Assets appropriated for expenditure (348,115) - (348,115)

Endowment net assets, end of year $ 5,527,334 $ 133,163 $ 5,660,497


DECEMBER 31, 2012 AND 2011 __________

33

14. Pension Plan

Foundation employees participate in two separate pension plans sponsored by the United Methodist Church’s General Board of Pensions. For participants in the Defined Contribution plan, the Foundation contributes six percent (6%) of the employee ’s salary. Each conference-appointed clergy can participate in one of several plans. Presently, the clergy employees participate in either or both a Defined Contribution Plan and/or a Defined Benefit Plan where the Foundation contributes a percentage. This percentage ranged between twelve (12%) and thirteen (13%) of the participants’ salary. Pension expense for all employees totaled $61,750 and $56,983 for the years ending December 31, 2012 and 2011, respectively.

15. Operating Lease Commitment The Foundation leases its office space under a five-year noncancelable operating lease with an

escalating lease payments provision. Rent expense was $53,530 and $56,595 for the years ended December 31, 2012 and 2011, respectively.

The future minimum annual rental commitment due under this lease agreement is as follows:

2013 $ 53,923

2014 55,487 2015 42,514

$ 151,924

16. Related Party Transactions While the Foundation is an autonomous legal entity, its purpose has always been to support the

functions of the Annual Conference s, its churches, members and affiliates. Therefore the great majority of its activities are with parties related to the Church, Annual Conference s and its connectional units, local church congregations, etc. Accordingly related party transactions include the following:

The Foundation has invested funds from the Annual Conference s, local UMC churches,

and related individuals that had a fair value of $64,916,407 and $61,194,194 at December 31, 2012 and 2011, respectively. The Foundation's entire mortgage loan program ($24,232,327 and $20,783,031 receivable at December 31, 2012 and 2011, respectively) and the development fund certificate program ($27,394,250 and $26,888,195 liability at December 31, 2012 and 2011, respectively) are made up of related churches, Conference-related Foundation s, and individuals.


DECEMBER 31, 2012 AND 2011 __________

34

16. Related Party Transactions - Continued

Several members of the Board of Trustees belong to Churches and Conference related entities that have loans with the Foundation.

Several members of the Board of Trustees have invested personally in the private

placement certificates of deposit totaling $561,231 and $506,397 at December 31, 2012, and 2011, respectively.

A member of the Board of Trustees has contributed to a donor advised fund with a market

value of $1,201,577 and $1,217,457 at December 31, 2012 and 2011, respectively. This trustee also had an active guarantee on a church loan with an outstanding balance of $228,567 at December 31, 2012.

A member of the Board of Trustees has established an endowment managed by the

Foundation with a total market value of $144,493 and $129,699 at December 31, 2012 and 2011, respectively.

Several Board Members have gift annuities and unitrusts managed by the Foundation

with a total market value of $334,232 and $342,222 at December 31, 2012 and 2011, respectively .

Several employees have invested personally in the private placement certificates of

deposit totaling $35,045 and $39,269 at December 31, 2012, and 2011, respectively. Several employees have contributed to donor advised funds with a market value of

$13,182 and $13,101 at December 31, 2012 and 2011, respectively. As reflected in Note 3, investments include unsecured promissory notes payable issued by

the Foundation in the total amount of $4,930,900 and $6,671,234 at December 31, 2012 and 2011. Accordingly this amount has been eliminated in the Statement of Financial Position.


DECEMBER 31, 2012 AND 2011 __________

35

17. Funds Held as Agent

The Foundation enters into designated fund agreements with various entities for the purpose of establishing funds in the Foundation's trustee investment account. These 391 accounts are primarily invested in funds established by the Georgia United Methodist Foundation, Inc.

The Foundation charges a fee to administer the funds for each entity. This fee is received on a quarterly basis and it is based upon the market value of the account at quarter-end. The various entities can withdraw their funds at any time with the appropriate notice. At December 31, 2012 and 2011, the market value of all of these accounts totaled $64,916,40 7 and $61,194,194 , respectively .

18. Concentration of Credit Risk and Other Concentrations

Financial instruments that potentially subject the Foundation to concentrations of credit risk consist principally of cash and investments. The Foundation has a significant concentration of cash deposited in three financial institutions, and the account balances exceed federal insurance limits. The Foundation’s bank account balances, as reflected in the bank records, are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Foundation’s cash balances exceeded the FDIC-insured limit by approximately $5,930,358 and $3,941,688 at December 31, 2012 and 2011. Funds held in money market investments are not covered by FDIC insurance.

The Foundation’s investments, other than loans, do not represent a significant concentration of credit risk due to the diversification of the Foundation’s portfolio among instruments and issues. However, investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the near-term could materially affect the amounts reported on the statement of financial position.

The Foundation receives deposits related to its certificate program from various entities who all reside in the State of Georgia. The Foundation also makes loans to churches throughout the state of Georgia. Changes in economic conditions in these areas could affect the Foundation's ability to receive mortgage payments from churches and pay their obligations under the certificate program. The limited geographic area in which the Foundation operates increases the Foundation's exposure to certain business concentrations.

19. Subsequent Event

In February 2013, the Foundation sold the other real estate taken in lieu of foreclosure during 2010 for $412,998 resulting in a gain on sale of $48,734.

2012-12-31: financial statements · 2018-01-04 · salaries and wages $ 551,248 $ 140,471 $ 691,719...

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